AREF welcomes consultation on stamp duty land tax seeding relief

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The Association of Real Estate Funds (AREF) has welcomed the consultation on stamp duty land tax seeding relief (SDLT), announced in Wednesday’s budget statement by UK chancellor George Osborne.

Currently, SDLT is imposed when a Property Authorised Investment Fund (PAIF) is launched by transferring existing property portfolios, for example held in life funds, as seed assets.

Seeding a PAIF in this way attracts an SDLT charge of four per cent, which has been a significant impediment to launching these vehicles in the UK.

AREF has been working with the government to introduce an SDLT seeding relief to encourage new PAIF launches.

John Cartwright, AREF chief executive, says: “We look forward to continued discussions with the government to ensure the success of the PAIF regime by considering the removal of a tax which is deterring new PAIFs from being launched.
“Such a change would bring us in line with other jurisdictions in Europe and make the UK more attractive for domiciling PAIFs, which coincides with the government’s Investment Management Strategy.

“Our members have told us they would prefer to manage UK domiciled funds as it is significantly less costly and time consuming than managing an overseas equivalent and these benefits can be passed on to investors. The introduction of SDLT seeding relief would facilitate this.

“With auto-enrolment underway and the growth of the defined contribution market, a PAIF is an obvious solution to diversify investors’ portfolios and access property on a tax exempt basis.”